Merced Sun-Star
Stockton releases bankruptcy plan; CalPERS payments unaffected
Published: September 27, 2013
2013-09-28T04:46:32Z
By Dale Kasler, The Sacramento Bee
The bankrupt city of Stockton vowed
Friday to continue making all its required pension payments to CalPERS even as
it forces its Wall Street creditors to accept less than full payment on their
debts.
In its closely watched bankruptcy plan, released late Friday afternoon, the
city said it will ghonor its obligations to fund employee retirement benefits
under the CalPERS pension plan.h
The Stockton bankruptcy – along with San Bernardinofs case – has shaped up as
a major test of the sanctity of public pensions, generating a showdown between
Wall Street and Californiafs powerful public pension fund. Stockton has
indicated, since filing for bankruptcy last year, that it would keep paying
CalPERS every penny itfs owed, infuriating bond insurance companies that
guaranteed Stocktonfs borrowings and would stand to lose millions of dollars.
The bond companies tried to get the bankruptcy filing thrown out of court last
spring but lost.
The massive plan document submitted to the Stockton City Council by staff
members reinforces the concept that CalPERS would be held harmless while other
creditors would suffer losses. The city pays CalPERS about $29 million a year,
according to officials with the California Public Employeesf Retirement
System.
While their pensions would be protected, officials noted that city employees
are suffering in other ways. The proposed plan gsignificantly impairs the
interests of former employees and retirees with respect to health benefits,h the
document says. It notes that the city in the last three years has slashed its
workforce by 30 percent, including a 25 percent cut in police officers.
The council could approve the plan as early as next week and then forward it
to U.S. Bankruptcy Court in Sacramento. Ultimately, the plan would go to a vote
of the various creditors and then the judge before it can take effect.
Donald Cutler, a spokesman for one of the bond insurers, Bermuda-based
Assured Guaranty, said the company wouldnft comment immediately on the plan.
gOur team is reading through it,h he said, referring to the 266-page
document.
In a statement, CalPERS said Stocktonfs plan follows the law and recognizes
gthe importance of a secure retirement to its current employees and retirees,
and the positive impact that pensions have on recruitment and retention of
quality public servants.h
Call The Beefs Dale Kasler, (916) 321-1066. Follow him on
Twitter @dakasler